9911796707
TMI Blog2016 (10) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... a ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER This appeal, filed by the Revenue, being ITA No. 3019/Mum/2014, is directed against the appellate order dated 11th February, 2014 passed by learned Commissioner of Income Tax (Appeals)- 34, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 22nd March, 2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the Revenue before Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) in the memo of appeal filed with the Tribunal read as under:- 1. On the facts and in the circumstances of the case and in law, the learned CIT [A] erred in directing the AO to accept the G.P. @3% and deleting the balance addition from the total of ₹ 95,25,636/- made by the AO on account of non-genuine and unproved purchase from the parties declared as Hawala Operator by the Sales Tax Department of Maharastra State. 2. On the facts and in the circumstances of the case and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 401024 04 Bhavani Trade Impex 27520680505V BBZPS3489Q 2010-11 299853 05 SS Enterprises 27950562074V ABGFS2578E 2010-11 678912 06 Darshan Sales Corporation 27920382883V AAGPG7681P 2010-11 310424 07 Siddhi Enterprises 27860154093V AHUPK6877P 2010-11 886584 08 Amar Enterprise 27030265566V AIRPB6559J 2010-11 67564 09 Dhruv Sales Corporation 27760622173v Ahypd6115e 2010-11 399360 10 Riddhihi Siddhi Enterprises 27020601531v AFIPV6475P 2010-11 262694 11 Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shwar Enterprises. 3. Statement dated 15-07-2011 Affidavit dated 16-07-2011 of Shri Sanjay Manharlal Solanki Prop Bhavani Trade Impex. 4. Statement affidavit dated 18-07-2011 of Shir Pravin Meraj Bishoni/Shah Partner of M/s Amar Enterprises, M/s Bright Corpn, M/s Nageshwar Enterprise, M/s Samarth Enterprises and M/ s Shubhlaxmi Sales Corpn. The copies of the above documents were given to the assessee by the AO whereby it was proved that these 20 parties did not supply any goods to the assessee and the parties issued bills without delivering any goods or services and the payments received by these parties were returned to the assessee in cash after deducting their commission. Notices were sent u/s 133(6) of the Act to all these parties but the same were returned by the postal authorities with the remark that unclaimed / not known . The assessee was asked to produce the whereabouts of the parties or produce the parties for verification and to prove the genuineness of the purchases. However, the assessee himself submitted the ledger of the parties, which as per the A.O. cannot be relied upon as the assessee neither produced the parties nor provided the new addresses. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Old supplier 3 Shubhlaxmi Sales Corpn. 4,01,024/- Statement filed with Sales Tax Department New supplier Confirmation already filed during assessment proceedings!. 4 Bhavani Trade Impex 2,99,853/- Statement filed with Sales Tax Department New supplier - 5 SS Enterprises 6,78,912/- Old supplier 6 Darshan Sales Corporation 3,10,424/- New supplier 7 Siddhi Enterprises 8,86,584/- New supplier 8 Amar Enterprises 67,564/- Statement filed with Sales Tax Department New supplier 9 Dhruv Sales Corporation 3,99,360/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the information received from the Sales Tax Authorities and the website of the Maharashtra Government whereby it was alleged that the twenty parties were engaged in hawala business and did not supply material to the assessee and issued bogus sales invoices. It was submitted by the assessee that the A.O. in his assessment order confirmed that only 9 parties have given statements/affidavits to Sales Tax Department that they were engaged In providing accommodation bills. It was submitted that the A.O. has not examined the parties and had not given opportunity to the assessee to cross examine these parties. Only nine parties had given statement or affidavits to the Sales Tax Departments and total purchases from such parties amounts to ₹ 34,01,893/- as against addition of ₹ 95,25,636/-. It was submitted that the AO has not gathered any material directly but has relied upon the information received from Sales Tax Department and also website of Maharashtra Government. It was submitted that the assessee was never asked to provide the whereabouts of the parties or produce the parties for verification and thereby prove the genuineness of the transactions. It was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not carry any opening and closing inventory and the action of the AO of disallowing the purchases of ₹ 95,25,636/- leads to absurd results as under:- Sr No Item Amount Amount 1 Sale 7,34,89,568/- 2 Purchases 6,93,56,301/- Less: Alleged bogus purchases (95,25,636/-) 5,98,30,665/- 3 Gross profit 1,36,58,913/- 4 Gross profit ratio 18.57% In support, the assessee relied upon the following decisions:- Sr o. Case Citation Authority 1 Commissioner of Income Tax v. Leaders Valves (P) Ltd. 258 ITR 435 High Court of Punjab Haryana 2 J. R. Solvent Industries (P) Ltd. v. Asstt. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the ld. CIT(A) held that since the A.O. also had accepted the sales corresponding to the bogus purchases introduced, A.O. was directed to accept the GP @ 3% as the income had escaped tax and learned CIT(A) ordered deletion of the balance amount, vide appellate order dated 11.02.2014. 6. Aggrieved by the appellate order dated 11.02.2014 passed by the ld. CIT(A), the Revenue is in appeal before the Tribunal. 7. The ld. D.R. relied upon the orders of the A.O. and submitted that notices were issued u/s 133(6) of the Act to the 20 parties from whom the bogus purchases were made by the assessee aggregating to ₹ 95,25,636/- which could not be served on these parties as these parties were not available at their given addresses. Information was received from Sales Tax Department that these twenty parties are indulging in bogus accommodation entries and nine out of these twenty parties have given affidavit/statement before the Sales Tax Authorities that the purchase bills provided by them are bogus and merely accommodation entries whereby cash was given to the assessee back after retaining their commission. The copies of their affidavit/statement was duly furnished to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitative stock of sale with purchases to reconcile stock, confirmations from certain parties which are placed in voluminous paper book filed with the Tribunal running into 384 pages. 9. We have considered the rival contentions and also perused the material available on record including the case laws relied on. We have observed that the assessee is a trader in iron and steel. The assessee has made purchases to the tune of ₹ 6.94 crores during the previous year relevant to the assessment year. During the course of assessment proceedings, Information was received by the A.O. from the Sales Tax Department that 20 parties with whom the assessee dealt had indulged in accommodation entries for providing bogus bills, and these hawala dealers were engaged in providing accommodation entries by way of bogus purchase bills were also listed in Maharashtra Government- Sales Tax website as bogus dealers. They were hawala dealers engaged in providing bogus purchase bills whereby there is no actual supply of material and as against cheque received by them against bogus bills, cash was returned to the assessee after deducting commission. Out of 20 parties, 9 parties had given affidavit/sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de as it did not wanted to litigate the matter further and wanted to buy peace of mind. Nine out of twenty parties have already given the statement and the affidavit that they had indulged in hawala bogus accommodation entries whereby cash was returned to the assessee by these parties after deducting their commissions against the cheque paid by the assessee to settle payment against the bogus purchase bills which were merely accommodation entries arranged by these 20 bogus dealers whereby no actual supply of material took place as per the contentions of the Revenue and as per facts as emerging from the records which remained uncontroverted as the assessee could not bring on record new addresses of these 20 dealers nor could produce these 20 dealers before the Revenue . The assessee has submitted that he is purchasing the material through brokers and he is not aware of the parties who were supplying material to the assessee. It is incumbent upon the assessee to produce the parties before the A.O. in order to establish genuineness of the purchases. Keeping in view the peculiar facts and circumstances of the case as emerging from the records and surrounding circumstances , we are of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd.and other concern promoted by Shri Pravin Agarwal had indulged in suspicious transactions but admitted that no actual business of sale and purchase was carried out by them and that these transactions were all accommodation entries in respect of which the assessee and others were beneficiaries. In this survey it was found that in the period relevant to assessment year 2007-08, the assessee had purchased materials worth ₹ 2,27,60,254/- from M/s. Shraddha Saburi Merchants Ltd. and ₹ 1,55,09,505/- from M/s. Sai Kripa Metallic Tradecom Ltd., for which payments made by the assessee were credited in the aforesaid two parties bank accounts and the same was withdrawn in cash on the very next dates after its deposits; the assessee being the main beneficiary of these activities. The survey action revealed that the assessee had taken accommodation bills showing bogus purchase during the period relevant to assessment year 2006-07 and 2007-08 from M/s. Shraddha Saburi Merchants Ltd., and M/s. Sai Kripa Metallic Tradecom Ltd. The above modus operandi and the fact that the assessee was a beneficiary of such activities was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Prakash J. Shah of the assessee firm and not real sale/purchase transactions as presently claimed by the assessee. In this view of the matter, the Assessing Officer at para 10 to 12 of the order of assessment held that since the assessee could not substantiate the purchases made from the aforesaid two concerns, the entire alleged purchases of ₹ 3,82,69,759/- shown by the assessee from M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. as bogus and brought the entire amount to tax in the assessee s hands. The assessment was accordingly completed under section 143(3) of the Act vide order dated 31/12/2009 wherein, the income of the assessee was determined at ₹ 3,87,89,670/-. 3.1 Aggrieved by the order of assessment for assessment year 2007-08 dated 31/12/2009, the assessee preferred an appeal before the CIT(Appeals)-31, Mumbai. The CIT(Appeals) disposed off the assessee s appeal vide the impugned order dated 17/8/2012 allowing the assessee partial relief. In the course of appellate proceedings, the CIT(Appeals) remanded to the file of the Assessing Officer for enquiries to be made for the purpose of corroborating the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Aggrieved by the order of the CIT(Appeals) -31, Mumbai dated 17/8/2012 for assessment year 2007-08, both Revenue and the assessee have preferred appeals before the Tribunal in respect of the issues held against them. 4.1.1 The grounds raised in the assessee s appeal are as under:- I 1.The Commissioner of Income Tax ( CIT(A) ) erred in making confirming addition of ₹ 18,48,429/-, being estimating the additional commission income on the accommodation bills of bogus purchases made from M/s. Sai Kripa Mettalic Tradecom Pvt. Ltd., and M/s Shardhha Saburi Merchants Ltd @ 5% of the total purchase amount from the above two parties, after deducting the net commission income of ₹ 65,0591- shown in the books of account. 2. The learned CIT(A) was already satisfied and has verified all the purchases and sales bills with the net income out of these transactions which were fully supported by the account payee cheques and was accepted that no cash transactions were involved. 3. The transactions proved the modus operendi of direct purchases and sales by the parties where your appellant was only delcreder agent supported by various documentary confirmations under the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of bogus purchases from the aforesaid two parties and in assuming that the assessee has merely earned commission in respect of the aforesaid purchases. 5.3 The assessee s Grounds I(1) and Revenue s Grounds (1 to 4)(supra) being both in respect of the contrary findings of the Assessing Officer and the CIT(Appeals) on the same issue of determination of the income earned by the assessee from out of the transactions of bogus purchases amounting to ₹ 3,82,69,759/- made by the assessee from the two parties M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd., these issues being inter connected and arising from the grounds raised by both sides in respect of the same set of transactions, they are being considered and disposed off together hereunder. 5.4.1 The Ld. Representative for the assessee , on the issue raised in Revenue s appeal, vehemently supported the impugned order of the CIT(Appeals) in respect of its finding holding that the Assessing Officer was not justified in holding that the entire purchases of ₹ 3,82,69,759/- made by the assessee from the two purchase parties i.e. M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is contradictory as before the CIT(Appeals) the claim was that commission in such type of business would be 1 to 2% thereof. In these circumstances, since the averments of the assessee are bereft of any corroborative material evidence, the assessee s appeal ought to be dismissed. 5.6.1 We have heard the rival contentions, in respect of both the assessee s as well as Revenue s cross appeals, and perused and carefully considered the material on record. The facts of the matter, from the assessment to the first appellate proceedings, leading to the present appeal have been briefly narrated at para 2.1 to 3.2 of this order (supra). On a perusal of the impugned order, we find that the CIT(Appeals) has made a detailed consideration of the order of assessment, the averments of the Ld. Representative for the assessee for the assessee, the various remand reports submitted by the Assessing Officer , the assessee s rebuttals, details filed in the report of DDIT(Inv) Unit IV, Mumbai. We also find that, after consideration of all these material on record, the CIT(Appeals) observed that no material evidence was brought on record by the Assessing Officer /DDIT (Inv) to establish that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akash J. Shah dated 06.01.2012 as well as the affidavits of Shri Raju Bhansali Shri Chanduprakash Bhansali dated 14.05.2010 and the affidavit of Shri Pravin T. Agarwal dated 19.05.2010 as discussed above. Besides, I have also gone through the statement of Shri Prakash J. Shah partner of the appellant firm recorded during the course of survey u/s 133A of the Act as well as the statement of Shri Pravin T. Agarwal recorded u/s 131 of the Act dated 24.03.2008 and his written confession submitted vide letter dated 02.11.2007 before the ADIT (Inv). On perusal thereof I find the appellant has shown purchases of alluminium and copper rods of ₹ 3,82,69,759/- from M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Limited and its corresponding sales to M/s D.C. Metals and M/s Rajasthan Aluminum during the relevant accounting year. However, based on the various enquiries made and evidences gathered in the case of the appellant by the ADIT (Inv.), Unit - IV (1), Mumbai it was found that no such goods were purchased from M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd inasmuch as these sales bills issued by M/s Shraddha Saburi Merchants Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r unexplained income. The AO herself vide para-4 of her remand report dated 19.09.2011 has confirmed the submissions of the appellant that the source of payments made to M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd through banking channels are originating out of the payments received from M/s D.C. Metal and M/s Rajasthan Aluminum by the appellant. From the same as well as from the details and evidences brought on record it is seen that the appellant has been acting only as an conduit oran agent to facilitate the bogus transactions of purchases and sale of aluminum sheets and copper wires rods taken place between M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd (sale parties) and M/s D.C. Metal and M/s. Rajasthan Aluminum ( purchase parties) merely as an middlemen or an indenting agent; whereby, the appellant has in turn issued bogus or accommodation sale bills in favour of M/s D.C. Metal and M/s. Rajasthan Aluminum against the receipt of similar bogus or accommodation sale bills issued by M/s.Shraddha Saburi Merchants Ltd and M/s.Sai Kripa Metallic Tradecom Ltd. Or in other words, it has acted merely as an indenting agent or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market in cash and thereafter sold to M/s D.C. Metals and M/s Rajasthan Aluminum. On the other hand from the affidavits of the Shri Chandra Prakash Bhansali and Raju Bhansali dated 14.05.2010, the material purchased is directly delivered by the concerned manufacturers or suppliers to their godowns without any involvement of the appellant. It was also stated that these suppliers I manufacturers are having their godowns situated outside Mumbai, Check Naka, where M/s D C Metals and Rajasthan Alluminium are also having their godowns I warehouses. On account of these facts and evidences placed on record, I find sufficient merits in the submissions of the AR that the appellant has only facilitated the concerned purchase and sale parties, being a conduit in the process of legalization of the transaction of bogus purchases and sales against payment of pre-fixed commission. These submissions of the appellant are duly corroborated by the affidavits of Shri Pravin T Agarwal, promoter of M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd and Shri Chandra Prakash Bansali and Shri Raju Bhansali, partners of M/s. D C Metals and M/s. Rajasthan Alluminium respectively. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchases are not genuine but at the same time the corresponding sales shown are genuine sales. If the purchases are bogus without proving that the appellant has purchased the same items in grey market in cash it cannot be held that the corresponding sales are genuine. However, nothing is brought on record either by the AO or by the DDIT even though the matter was specifically remanded for this purpose. Therefore, I find sufficient merits in the submissions of the AR that if the purchases are found bogus, the corresponding sales of the same item as shown by the appellant in its books of accounts cannot be considered as genuine sales. Nevertheless, no details of whatsoever nature about the parties from whom, the material is purchased, its movement or transportation to the godown of M/s. D C Metals and M/s. Rajasthan Alluminium is brought on record by the AO or by the DDIT(Inv), in spite of conducting survey u/s 133A of the Act. Further, there is no evidence to prove that the cash withdrawn by Shri Pravin T Agarwal is returned to the appellant and not to M/s. D C Metals or M/s. Rajasthan Alluminium, particularly considering to the contents of the affidavit of Shri Prakash J Shah, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re also having their godowns /warehousing facilities. Further, it is also noticed that the entire amount of Maharashtra-VAT on these transactions is paid by M/s DC Metals / M/s. Rajasthan Alluminium. 2.4.3. Therefore, on account of these facts available in the case of the appellant, as discussed above and further in the absence of any new facts and evidences brought on record by the AO as well as in the absence of any corroborative evidences placed on record in spite of remanding the matter on various occasions, I find it cannot be held that the entire purchases made by the appellant are out of Its unaccounted sources or the same is to be considered as its unexplained income. Even otherwise, even if the purchases are held as bogus, to my considered opinion, it cannot be held that the corresponding sales are genuine; particularly when the quantity purchased and sold are same. Obviously, in such a circumstance if the purchases are considered the corresponding sales also has to be bogus. Therefore, on account of the same, it is evident that under the given facts and circumstances the appellant has merely issued accommodation sales bills against the payment of pre-fixed commission a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minium and M/s. D.C. Metals. The same works out to 0.17% of the total purchases. The bogus purchases made from M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd is of ₹ 3,82,69,759/- for the relevant accounting year. The AR has consistently argued that the rate of commission allowed in this line of business normally does not exceed more than 1% to 2% of the sale value. However, to my considered opinion the same cannot be taken on its face value, particularly in view of the lack of evidences and the clandestine nature of business carried out by the appellant. And also considering to the fact that the appellant itself has shown such commission of 0.17%( as discussed above) which is much lesser than the rate of commission admitted by the AR in the similar line of business or practice. Therefore, on account of the same, I find it would meet the end of justice, in case, the rate of commission charged by the appellant is taken @ 5% of the total purchase value of the appellant during the relevant accounting year. The same on total such purchases of ₹ 3,82,69,759/- works out to ₹ 19,13,488/-for the relevant assessment year. Since, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA no. 6611/Mum/2012 vide orders dated 17-02-2016, Respectfully following the orders of the co-ordinate Bench of this Tribunal in ITA No.6457/Mum/2012 and ITA no. 6611/Mum/2012 vide orders dated 17-02-2016 in the case of assessee company s sister concern M/s Prakash Metals, we partly allow the appeal filed by the assessee company by holding that the assessee company s income from these transactions be computed as 5% of commission for clandestinely facilitating the bogus transaction of the parties to the purchase and sale as held by the Tribunal in its orders in the case of the sister concern of the assessee company namely M/s Prakash Metals in ITA No.6457/Mum/2012 and ITA no. 6611/Mum/2012 vide orders dated 17-02-2016, which will meet the end of the justice which is also conceded by the assessee company s counsel to be acceptable to the assessee company to end litigation with the Revenue , keeping also in view of the afore-stated decision of the Tribunal in the case of the assessee s sister concern M/s Prakash Metals on similar facts which was stated by the learned counsel for the assessee company was also accepted by the said concern M/s Prakash Metals to end litigation with Rev ..... 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